Businesses around the world are being forced to balance the pursuit of innovative growth opportunities with the increasing risks associated with pursuing them. While many governments are being compelled to employ dramatic austerity measures to reverse devastating cash flow problems, businesses have adopted conservative budgetary approaches to protect precious assets from economic risk.
In such times of uncertainty and risk-adverse business environments, one attitude remains prevalent: the best approach for mitigating risk is to preserve cash. Reports that companies continue to sit on trillions of dollars in cash reserves demonstrate that this approach is widely followed.
Unfortunately, austerity measures, uncertainty and reduced investment in innovation directly limit a company’s growth potential. Although seasoned executives still understand the correlation between risk and reward, today’s business conditions are influencing many business leaders to forgo “break-through” growth strategies in exchange for maintaining the seemingly safer status-quo.
Visionary executives, however, also recognize that simply maintaining the status-quo contains the inherent risk of losing their competitive advantage and missing potential business and strategic opportunities. They understand that change is inevitable, if not desired. The question then becomes, do they act in order to manage change; or, do they risk being victimized by it?
Innovators and skilled strategists understand that creating new efficiencies within business processes protect precious cash reserves, regardless of the economic environment.
That last point reminds me of a recent conversation I had with an executive of a global company. In order to protect the company’s cash, he has been tasked to decrease overhead costs. He recognized that, in order to achieve meaningful results, he requires a ‘break-through’ change in the way he conducts business. He also determined that the innovation he seeks would not come from an internal effort that could take years to develop; so he looked for external expertise that could produce timely, and more dramatic results.
With the objective of achieving single-digit cost reductions, this executive was pleasantly surprised to learn that the software solution I was discussing with him came with a guarantee of much greater cost savings and a significant, near-term ROI. In spite of that potential benefit, however, this executive’s first priority was to mitigate the risk of committing precious budget resources toward change without solid proof that it would result in meaningful cost reductions while at the same time bringing new value to his company’s business processes. Companies that objective will continue to progress even in uncertain times.
One approach for mitigating risk is to make more informed decisions by collecting and leveraging information. When properly designed and implemented, sales profitability intelligence gives business leaders accurate and actionable information about the profitability of their sales transactions, products and product groups, sales reps and sales teams, promotions, campaigns and other sales initiatives.
When fully understood, information becomes intelligence, and sales profitability intelligence is crucial to optimizing a company’s profit potential – especially during times of increasingly slim profit margins.
The transparency provided by this intelligence is also useful in protecting cash while feeding innovation by exposing:
Unnecessary Overhead Costs
Additionally, such information, when effectively analyzed, uncovers critical opportunities for achieving greater economies of scale without creating major disruptions in current business operations.
Consider your organizational DNA
If you suddenly had the means to evaluate every revenue-generating base, and its associated cost, within your organization, imagine how your organization could leverage the net costs and benefits found in:
The specific financial value to your company of every sales transaction
The effectiveness of sales commissions to produce that value
Validation of your sales commission strategy on sales force behavior
Bottom-line benefits realized from specific promotions and campaigns
Ultimately, the proper application of knowledge will mitigate risk better than most strategies. Some would define that as wisdom. Wise executives will recognize the powerful and far-reaching impact the efficient collection and proper application of knowledge has on their success.
At a time when ‘analysis paralysis’ and a prevailing mindset that no decision is better than a wrong decision permeate business strategies, innovative executives can seize upon a significant competitive advantage by simply making informed, fact-based decisions to pursue innovative opportunities. While many linger in states of confusion and uncertainty, for the wise executive the current environment presents a rare opportunity to incorporate new innovation with very little financial exposure.
To learn how sales profitability intelligence can unlock the door to risk-free innovation for your company, visit www.glocent.com.